Securities and Shareholder Litigation

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On November 25, 2020, a shareholder of First American Financial Corporation (“First American”) filed suit against the company and its officers and directors over a massive data security breach that exposed hundreds of millions of sensitive customer records. The shareholder derivative action, filed by Norman Hollett in Delaware federal court, alleges breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and multiple violations of the Securities Exchange Act of 1934, all relating to the failure to contain and timely disclose the breach.

In times of crisis, fraudsters attempt to exploit the latest news developments to lure investors into scams, and the once-in-a-century global health crisis we are currently facing is no exception. On February 4, 2020, the SEC noted in an Investor Alert that it was aware of a number of web-based promotions claiming that the products or services of publicly-traded companies could prevent, detect, or cure COVID-19—and that the stock of these companies would skyrocket as a result. The Investor Alert warned market participants to be vigilant and put publicly-traded companies on notice that the Commission is watching.

Judge Thomas W. Thrash Jr. of the U.S. District Court of Georgia permanently shelved a derivative suit brought by shareholders of Home Depot.

Home Depot is a multinational home improvement retailer. In September, 2014, Home Depot suffered a data breach that resulted in $192 million in net losses. This breach followed the widely publicized data breaches at several other major retailers and department stores.

Last month, the Delaware Chancery Court drastically reduced – from $275,000 to $50,000 – a mootness fee award requested by plaintiffs’ counsel in a lawsuit challenging the merger between PayPal and Xoom Corporation, finding the supplemental disclosures that flowed from the lawsuit provided only minor benefits to stockholders. In re Xoom Corp. Stockholder Litigation. The steep fee reduction reinforces Trulia’s admonition earlier this year that the days of $250,000-$350,000 attorneys’ fee awards for meaningless additional disclosures are over, as Delaware judges will carefully scrutinize attorneys’ fee requests for litigation that yields disclosures of little or no value.

In Jinnaras v. Alfant, decided on May 5, 2016, the New York Court of Appeals rejected a proposed settlement of a shareholder class action, where the proposed settlement would have deprived out-of-state class members of a “cognizable property interest” by failing to provide a mechanism for class members residing…